The ACIT, 5(1), V. The State Bank of Indore,

ITA 23/IND/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8014 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-03-2010
• Assessment Year: misc
• Appeal Filed On: 05-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K K SINGH
• Keywords: Rectification of order; Bad and doubtful debts
• Section: 143(3); 250; 150(1); 147; 148; 263; 63; 12; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO.23/IND/2007 A.Y. 2003-04 AND ITA NO.851/IND/2005 A.Y. 2002-03 ASSISTANT COMMISSIONER OF INCOMETAX 5 (1), INDORE APPELLANT VS STATE BANK OF INDORE INDORE PAN AAECS 7776 C RESPONDENT DEPARTMENT BY : SHRI K.K. SINGH, CIT, DR APPELLANT BY : SHRI MANOJ MUNSHI, ADVOCATE O R D E R PER JOGINDER SINGH, JM BOTH THE APPEALS ARE BY THE REVENUE AGAINST DIFFER ENT ORDERS OF THE LEARNED CIT(A) DATED 10.10.2006 & 6.9.2005 RESP ECTIVELY. FIRST, 2 WE SHALL TAKE UP APPEAL IN ITA NO.23/IND/2007 (ASSE SSMENT YEAR 2003-04), WHEREIN THE ONLY GROUND RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSI ONER OF INCOME- TAX (APPEALS) ERRED IN LAW IN ALLOWING THE DEDUCTIO N U/S 36(1)(VIIA) OF THE ACT AMOUNTING TO RS.15,73,02,994/- TO THE ASSES SEE BANK BY WAY OF ADDL. DEDUCTION ESPECIALLY WHEN THERE IS NO SUCH STIPULATION U/S 36(1)(VIIA). AT THE OUTSET, IT WAS CLAIMED BY THE L D. COUNSEL FOR THE ASSESSEE, SHRI MANOJ MUNSHI, THAT THE IMPUGNED ISSU E IS COVERED BY THE DECISION OF THE TRIBUNAL (ITA NO.353/IND/2008) FOR ASSESSMENT YEAR 2001-02. THIS FACTUAL MATRIX WAS CONSENTED TO BE CORRECT BY THE LD. CIT, DR SHRI K.K. SINGH. MR. MUNSHI STRONGLY DE FENDED THE IMPUGNED ORDER. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. IN VIEW OF THE AFORESAID ASSERTION, WE ARE REPRODUCING HERE UNDER THE RELEVANT PORTION OF THE AFORESAID ORDER DATED 28.1.2010. THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT DATED 27.3.2006, WHEREIN THE FIRST GROU ND RAISED IS THAT THE LEARNED COMMISSIONER-II, INDORE, ERRED IN ISSUING NOTICE U/S 263OF THE INCOMETAX ACT, 1961 DA TED 20 TH MARCH, 2006 AND FAILED TO APPRECIATE THAT THE ASSES SMENT ORDER DATED 8 TH MARCH, 2008 WAS U/S 143(3) WAS NEITHER 3 ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF REVEN UE, THEREFORE, THE DEDUCTION AS CONTAINED IN CLAUSE (A) OF SECTION 36(1)(VIIA) ON ACCOUNT OF BAD DEBT WAS CORRECTLY AL LOWED BY THE AO, THEREFORE, NO DISALLOWANCE CAN BE MADE AS P ROPOSED IN THE NOTICE AND CONSEQUENT PASSING OF ORDER U/S 2 63 IS BAD WHICH DESERVES TO BE VACATED. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I MANOJ MUNSHI, LEARNED COUNSEL FOR THE ASSESSEE AND SHRI R .K. CHAUDHARY, LEARNED CIT DR. THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE IS THAT WHETHER THE AO IS HA VING ANY POWER TO GIVE SUGGESTION TO THE LEARNED COMMISSION ER TO INVOKE POWERS U/S 263 OF THE ACT BY FURTHER CONTEND ING THAT SECTION 263 ONLY EMPOWERS THE COMMISSIONER TO INVOK E HIS JURISDICTION AND NOT AT THE INSTANCE OF HIS SUBORDI NATE OFFICER, SPECIALLY WHEN THE LEGISLATURE HAS CONFERR ED POWER UPON THE LEARNED COMMISSIONER. RELIANCE WAS PLACED UPON THE DECISIONS IN THE CASE OF SIRPUR PAPER MILLS LIM ITED V. CWT (77 ITR 6) (SC), CIT VS. BHAGAT SHYAM & COMPANY (188 ITR 608) (ALL). A PLEA WAS ALSO RAISED THAT O NCE ORDER U/S 143(3) IS PASSED AND THE AO HAS NOT CHALLENGED THAT THE AMOUNT WAS MISTAKABLY ALLOWED, THEREFORE, THE AO CA NNOT REVIEW HIS OWN ORDER. FURTHER RELIANCE WAS PLACED UPON THE DECISION IN B & A PLANTATION & INDUSTRIES LTD. AND OTHERS VS. CIT AND OTHERS (2007) B AND A PLANATATION & IND USTRIES LIMITED AND OTHERS V. CIT; 290 ITR 395 (GAU) (RELE VANT PAGE 399) ALONG WITH THE DECISION IN CIT V. GREEN W ORLD CORPORATION (314 ITR 81) (SC) AND CIT V. D.N. DOSAN I (2006) CIT V. D.N. DOSANI; 280 ITR 275 (GUJ.). ON THE OTHER HAND, THE LEARNED CIT DR STRONGLY DEFENDED THE IMPUGNED BY CONTENDING THAT THERE IS N O DICTATE OF A SUBORDINATE AS HAS BEEN ALLEGED BY THE LEARNED COUNSEL FOR THE ASSESSEE RATHER THE PERSON SITTING AT THE T OP IS ASSISTED BY HIS SUBORDINATES BECAUSE THE ASSESSING OFFICERS ARE ALSO WORKING UNDER HIM. IT WAS PLEADED THAT THE ONLY WAY TO CORRECT THE MISTAKE IS THAT IT SHOULD BE BRO UGHT TO HIS NOTICE. IT WAS PLEADED THAT THE LEARNED COMMISSION ER HAS WIDE POWERS FOR WHICH RELIANCE WAS PLACED UPON THE DECISION IN THE CASE OF LAXMIPAT SINGHANIA V.CIT (8 2 ITR 824(SC) BY FURTHER PLEADING THAT REFERENCE MADE BY THE AO IS A STAGE OF INQUIRY ONLY. FURTHER RELIANCE WAS P LACED UPON THE DECISION IN THE CASE OF 225 ITTR 904 (MP) A ND 231 4 ITR 53 (SC). MR. CHAUDHARY FURTHER PLEADED THAT THE ASSESSMENT WAS FRAMED U/S 143(3) AND IT IS THE WISD OM OF THE REVENUE AUTHORITY TO CHOOSE THE OPTION BUT NOT AT T HE PLEASURE OF THE ASSESSEE. IT WAS PLEADED THAT IT I S NOT THE REVIEW OF THE ORDER RATHER THE MATTER WAS REFERRED BY THE ASSESSING OFFICER TO THE CIT AS THE ASSESSMENT ORD ER WAS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERE STS OF THE REVENUE. IT WAS POINTED OUT THAT SHOW CAUSE NOTICE WAS DULY SERVED UPON THE ASSESSEE BY THE LEARNED CIT AND AF TER CONSIDERING THE REPLY OF THE ASSESSEE, A DETAILED O RDER WAS PASSED BY THE CIT. IT WAS PLEADED THAT THE DECISIO NS RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE TO THE FACT S OF THE PRESENT CASE . A STRONG PLEA WAS RAISED THAT EVEN ON THE DEBATABLE ISSUE THE LEARNED COMMISSIONER IS EMPOWE RED TO INVOKE HIS JURISDICTION. THE LEARNED CIT DR ALSO RE LIED UPON CERTAIN CASES WHICH HAVE BEEN MENTIONED IN HIS WRIT TEN SUBMISSIONS, THEREFORE, THE SAME ARE NOT BEING REPE ATED AND WILL BE DEALT WITH WHILE CONCLUDING THE ISSUE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. BRIEF F ACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BAN KING, FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR ON 15.1 0.2001 DISCLOSING TOTAL INCOME AT RS.43,63,42,540/- AND TH E RETURN WAS FINALIZED BY FRAMING THE ASSESSMENT U/S 143(3) VIDE ORDER DATED 8.3.2004 DETERMINING THE TOTAL INCOME A T RS.1,95,27,52,160/- . SUBSEQUENTLY, IT WAS NOTICED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSMENT SO FR AMED WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE, THEREFORE, HE PROPOSED FOR ACTION U/S 263 BY PROPOS AL DATED 17.3.2006 TO THE LEARNED COMMISSIONER. BASED UPON SUCH PROPOSAL, A SHOW CAUSE NOTICE DATED 20.3.2006 WAS S ERVED UPON THE ASSESSEE ON 21.3.2006 IN TERMS OF SECTION 263(1) OF THE ACT. IN THE SHOW CAUSE NOTICE, FOLLOWING THREE ISSUES WERE RAISED :- (1) THAT THE DEDUCTION ALLOWED AT RS. 11,30,74,938/ - WAS NOT JUSTIFIED. (2) THE EXPENDITURE ALLOWED AT RS.75,53,991/-, UNDE R THE HEAD STAFF WELFARE WAS UNJUSTIFIED AND (3) THE CLAIM OF RS.1,84,29,000/- ON ACCOUNT OF REG IONAL RURAL BANK LOSSES WAS INADMISSIBLE. 5 IT IS PERTINENT TO MENTION HERE THAT THE DEDUCTION OF RS.11,30,74,938/- WAS CLAIMED BY THE ASSESSEE IN CO NTEXT OF PROVISIONS OF FIRST PROVISO TO SECTION 36(1)(VIIA) OF THE ACT WHICH CAME INTO EXISTENCE WITH EFFECT FROM THE ASSE SSMENT YEAR 2000-01. THE FOLLOWING CLAIMS WERE MADE BY TH E ASSESSEE :- S.NO. ASSESSMENT YEAR CLAIMED AMOUNT(IN RS.) 1 2000-01 8,83,70,000 2 2001-02 11,30,74,938 3 2002-03 9,58,65,019 4 2003-04 15,73,02,994 5 2004-05 13,47,14,132 IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED/SERVED U/S 263 OF THE ACT, THE ASSESSEE ATTENDED THE PROCEEDINGS. THE LEARNED ASSESSING OFFICER WAS ALSO PRESENT BEFORE T HE LEARNED COMMISSIONER. THE ASSESSEE FILED WRITTEN SUBMISSIONS ALONG WITH COMPILATION. ANOTHER POINT PERTINENT TO MENTION HERE IS , AS CLAIMED BY THE ASSESSEE, IDENTICAL DEDUCTION FOR THE ASSESSMENT YEAR 2000-01 WAS CLAIMED AND ALLOWED BY THE DEPARTMENT. HOWEVER, THE DISPUTE AROSE TO THE ADMISSIBILITY OF RS.11,30,74,9 38/-, WHICH OTHERWISE WAS ALLOWED U/S 143(3)OF THE ACT AN D FOR THE ASSESSMENT YEAR 2002-03 VIDE APPELLATE ORDER DA TED 6.9.2005 THE CLAIM OF THE ASSESSEE WAS ALLOWED WHIC H HAS BEEN CHALLENGED BY THE REVENUE BEFORE THE TRIBUNAL AND THE SAME WAS CLAIMED TO BE PENDING. 4. THE FIRST CONTENTION RAISED BY THE ASSESSEE IS T HAT WHETHER THE ASSESSING OFFICER HAS POWER TO GIVE ANY SUGGEST ION TO THE LEARNED CIT TO INVOKE HIS POWERS U/S 263 OF THE ACT ?. THE LEARNED COUNSEL ADVANCED HIS ARGUMENTS ON THIS ISSUE AS MENTIONED ABOVE. IT IS SEEN THAT THE ASSESSEE FILED ITS RETURN ON 15.10.2001 AGAINST WHICH THE ASSESSMENT ORDER U/ S 143(3) WAS PASSED ON 8.3.2004 AND THE PROPOSAL FOR INVOKING JURISDICTION U/S 263 WAS MOVED ON 17.3.200 6. THE LEARNED COUNSEL FOR THE ASSESSE HAS CHALLENGED THAT THE AO NOWHERE STATED THAT THE IMPUGNED AMOUNT WAS MISTAKABLY ALLOWED AND IF SO HE HAD THE POWER TO RECTIFY HIS O RDER U/S 154 OR U/S 147 READ WITH SECTION 148 OF THE ACT. BE FORE MOVING FURTHER WE ARE OF THE VIEW THAT THERE IS NO BAR TO THE 6 AO TO BRING THE MATERIAL TO THE NOTICE OF THE LEARN ED COMMISSIONER FOR INITIATING HIS REVISIONARY POWERS U/S 263 BUT THE ONLY CONDITION IS THAT THE LEARNED COMMISSI ONER MUST APPLY HIS MIND ON THE MATERIAL PLACED BEFORE HIM AN D SATISFY HIMSELF/HERSELF THAT IT IS A FIT CASE WHERE REVISIO NAL POWERS CAN BE INVOKED. THIS VIEW IS SUPPORTED BY THE DECIS ION IN THE CASE OF CIT V. BHAGAT SHYAM & COMPANY (188 ITR 608 ) (ALL). IT IS PERTINENT TO POINT OUT HERE THAT IN T HE PRESENT APPEAL THE LEARNED COMMISSIONER HAS NOT ENCROACHED UPON THE JURISDICTION OF THE LD. AO RATHER A PROPOSAL WA S MADE BY THE LEARNED AO HIMSELF THAT THE ASSESSMENT FRAMED U /S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. IN THE PRESENT APPEAL, EVEN THE LEARNED COMMISSIONER ISSUED SHOW CAUSE NOTICE TO THE ASSESS EE BEFORE PASSING THE ORDER U/S 263 OF THE ACT. IF TH E ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTERESTS OF R EVENUE, THE LEARNED COMMISSIONER MAY NOT EXERCISE HIS REVISION AL JURISDICTION U/S 263(1) OF THE ACT. OUR VIEW IS SU PPORTED BY THE FOLLOWING DECISIONS :- (I) NAZIR SINGH V. CIT (2001) 252 ITR 820 (MP) (II) H.H. MAHARAJA PAWAR DEWAS V. CIT (138 ITR 518) (MP). (III)MALABAR INDUSTRIES; 243 ITR 83 (SC) (IV) AGRAWAL STEEL TRADERS; 250 ITR 737 (P&H) (V)FRIGONSCANDIA WINNER FOOD PROCESS SYSTEM ; 79 IT D 357 (IND) (VI)SMT. TARADEVI AGRAWAL V. CIT; 88 ITR 323 (SC) (VII)KJMC CAPITAL MARKET SERVICE LIMITED; 156 TAXMA N 187 (MUM) (VIII)CIT V. SESHASAYEE PAPER & BOARDS LTD.; 242 IT R 490(MAD) (IX)INDIAN TEXTILES V. CIT; 157 ITR 112 (MAD) (X)VENKATA KRISHNA RICE & CO. V. CIT; 163 ITR 129 (MAD.) (XI)CIT V. PUSHPADEVI; 164 ITR 639 (PAT.) (XII)BISMILLAH TRADING CO. V. INTELLIGENCE OFFICER; 248 ITR 292(KER) (XIII)THALIBAI F. JAIN V. ITO (101 ITR (KARN.) (XIV)GEE VEE ENTERPRISES V. ADDL.CIT; 99 ITR 375 (D EL) (XV)EMERY STONE MFG. CO. 213 ITR 843 (RAJ.) (XVI) CIT V. G.K. KABRA; 211 ITR 336 (AP) (XVII)CIT V. RALSON INDUSTRIES; 158 TAXMAN 160 (SC) (XVIII)CIT V. CHRISTIAN MICA INDUSTRIES LTD.; 120 I TR 627 (CAL) 7 (XIX)CIT VS. M.M. KHAMBATWALA; 198 ITR 144 (GUJ.) (XX)CIT V. KANUBHAI ENGINEERS PVT.LTD.; 241 ITR 665 (CAL) (XXI)CIT V. ANDHRA CIVIL CONST. LTD.; 140 TAXMAN 30 8 (MAD.) (XXII)MEGHALAYA PLYWOOD LTD. V.CIT; 106 TAXMANN 89 (GAU) 5. AS FAR AS THE ARGUMENT OF THE LEARNED COUNSEL FO R THE ASSESSEE THAT THERE IS NO POWER WITH THE LEARNED CI T TO INVOKE HIS JURISDICTION, UNDER THE FACTS STATED ABO VE, AS HAS BEEN DELIBERATED UPON BY HONBLE COURTS IN THE AFOR ESAID CASES, WE ARE OF THE CONSIDERED OPINION THAT IF THE TWIN CONDITIONS OF SECTION 263 OF THE ACT ARE SATISFIED, THE LEARNED CIT HAS POWER TO INVOKE HIS JURISDICTION THOUGH IT MAY NOT BE UNBRIDLED ONE. IT IS A MATTER OF ADMINISTRATIVE CONVENIENCE BETWEEN/AMONG THE OFFICERS OF THE REVEN UE DEPARTMENT TO SAFEGUARD THE INTEREST OF REVENUE AND THE OPTION FOR INVOKING THE JURISDICTION U/S 154, 147 R EAD WITH SECTION 148 AND SECTION 263 HAS TO BE DECIDED BY TH E REVENUE AUTHORITIES AND THE SAME CANNOT BE AT THE CONVENIENCE AND OPTION OF THE ASSESSEE. OUR VIEW FI NDS SUPPORT FROM THE RATIO LAID DOWN IN THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAKUNTA LA DEVI V. CIT; 82 ITR 416 ESPECIALLY WHEN SHOW CAUSE NOTIC E WAS DULY SERVED UPON THE ASSESSEE. THE REVENUE IS FURT HER FORTIFIFED BY THE DECISION OF THE HONBLE JURISDICT IONAL HIGH COURT IN CIT V. GULAM RASUL & OTHERS (225 ITR 904) WHEREIN NOTICE FOR REASSESSMENT WAS ISSUED U/S 147/ 148 OF THE ACT. IT WAS HELD THAT THE JURISDICTION OF THE LEARNED COMMISSIONER U/S 263 CANNOT BE TAKEN AWAY. WHILE C OMING TO THIS CONCLUSION, THE HONBLE COURT FOLLOWED THE DECISION IN CIT V. SUN ENGG. WORKS; 198ITR297(SC) AND SHARD A TRADING CO. V. CIT; 149 ITR 19 (DEL) AND ALSO CONSI DERED THE CASES IN GENERAL BEAOPAR CO. PVT. LTD. 167 ITR 86 (CAL); JAGMOHAN RAO V. CIT; 75 ITR 373 (SC); JIVAJI RAO SUGAR CO. LTD. V. CIT; 176 ITR 182 (MP) AND MADHAV RAO JIVAJIRAO BAHADUR V. UNION OF INDIA; (1971) AIR 197 1 SC 530. SECTION 263 OF THE ACT ENABLES THE COMMISSIO NER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND PASS SUCH ORDER THEREON AS THE CIRCUMST ANCES OF THE CASE JUSTIFY INCLUDING AN ORDER ENHANCING, MODI FY OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASS ESSMENT, IF HE CONSIDERS THAT ANY ORDER PASSED BY THE AO IS ERRONEOUS 8 INSOFAR IT IS PREJUDICIAL TO THE INTERESTS OF REVEN UE. 6. IT IS NOT THE CASE THAT REVIEW ORDER WAS PASSED BY THE AO RATHER HE REFERRED THE MATTER TO THE HIGHER WISDOM OF THE LEARNED COMMISSIONER WHEN HE FOUND THAT THE ASSESSM ENT ALREADY FRAMED U/S 143(3) IS ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. ONCE THE AO HIMSELF F OUND THE ORDER TO BE ERRONEOUS AND PREJUDICIAL, NOTHING DEBA RS HIM, UNDER THE ACT, TO REFER THE MATTER TO THE LEARNED COMMISSIONER FOR INVOKING HIS JURISDICTION U/S 263 OF THE ACT. EVEN THE LEARNED COMMISSIONER AFTER ISSUANCE O F SHOW CAUSE NOTICE U/S 263(1) OF THE ACT AND PROVIDING DUE OPPORTUNITY TO THE ASSESSEE PASSED A DETAILED ORDER . AS FAR AS THE RELIANCE OF THE ASSESSEE UPON THE DECISION I N THE CASE OF SIRPUR PAPER MILLS LIMITED (SUPRA), IT DOES NOT HELP THE ASSESSEE BECAUSE THE ASSESSEE CANNOT PICK AND CHOOS E THE PARTS OF THE ORDER AND THE WHOLE ORDER HAS TO BE RE AD. DURING HEARING OF THIS APPEAL, THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION IN THE CAS E OF GREEN WORLD CORPORATION (SUPRA) ESPECIALLY PARAS 58 , 59, 68 AND 72, WHICH ARE REPRODUCED HEREUNDER : 58. IT IS BEYOND ANY DOUBT OR DISPUTE THAT ONLY I N TERMS OF THE DIRECTIONS ISSUED BY THE COMMISSIONER DATED JUL Y 12, 2004, UNDER SECTION 263 OF THE ACT, NOTICES UNDER S ECTION 148 OF THE ACT WERE ISSUED. 59 . INDISPUTABLY, THE COMMISSIONER OF INCOME-TAX (SHIMLA) HAD NO JURISDICTION TO ISSUE DIRECTIONS. NOTICES ISSUED PURSUANT THERETO WOULD BE BAD IN LAW. WE MA Y, HOWEVER, PLACE ON RECORD THAT THE REVENUE IN THE L IST OF DATES WHILE QUESTIONING THE OBSERVATIONS MADE BY T HE HIGH COURT THAT THE NOTICES UNDER SECTION 148 OF THE ACT FOR THE ASSESSMENT YEARS 1996-97 AND 1997-98 ARE NOT SAVED FROM THE RIGOURS OF THE LAW OF LIMITATION, UNDER THE EXC LUSIONARY PROVISIONS OF SECTIONS 150(1) AND 153(3)(II) OF THE ACT, STATED : IN THIS REGARD, IT IS IMPORTANT TO NOTE THAT THES E NOTICES WERE ISSUED TO GIVE EFFECT TO THE DIRECTIONS CONTAI NED IN THE REVISION ORDER UNDER SECTION 263 PASSED BY THE COMMISSIONER OF INCOMETAX ON JULY 12,2004, UNLIKE S ECTION 149 OF THE ACT, THERE IS NO TIME LIMIT UNDER SECTIO N 150(1) THAT STARTS WITH NON OBSTANTE CLAUSE AND TO THAT EX TENT THE 9 OBSERVATIONS OF THE HONBLE HIGH COURT ARE IN ERROR . FURTHER, SECTION 150(2) PROVIDES NECESSARY RESTRICT ION ON SECTION 150(1) AND EVEN UNDER THE SAID RESTRICTION PROVIDED BY SECTION 150(2), THE ISSUE OF NOTICES UNDER SECTI ON 148 OF THE ASSESSMENT YEARS 1996-97 AND 1997-97 IN THE INS TANT CASE WITHIN THE RESTRICTED TIME LIMIT PROVIDED UNDE R SECTION 150(2) OF THE INCOMETAX ACT SECTION 150 OF THE ACT READS AS UNDER : 150. PROVISION FOR CASES WHERE ASSESSMENT IS IN PU RSUANCE OF AN ORDER ON APPEAL, ETC. (1) NOTWITHSTANDING ANY THING CONTAINED IN SECTION 149, THE NOTICE UNDER SECTION 148 MAY BE ISSUED AT ANY TIME FOR THE PURPOSE OF MAKING AN ASSESSMENT OR REASSESSMENT OR RECOMPUTATION IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN AN ORDER PASSED BY ANY AUTHORITY IN AN Y PROCEEDING UNDER THIS ACT BY WAY OF APPEAL, REFEREN CE OR REVISION OR BY A COURT IN ANY PROCEEDING UNDER ANY OTHER LAW. (2) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT APP LY IN AN Y CASE WHERE ANY SUCH ASSESSMENT, REASSESSMENT OR RECOMPUTATION AS IS REFERRED TO IN THAT SUB-SECTION RELATES TO AN ASSESSMENT YEAR IN RESPECT OF WHICH AN ASSESSMEN T, REASSESSMENT OR RECOMPUTATION COULD NOT HAVE BEEN M ADE AT THE TIME THE ORDER WHICH WAS THE SUBJECT-MATTER OF THE APPEAL, REFERENCE OR REVISION, AS THE CASE MAY BE, WAS MADE BY REASON OF ANY OTHER PROVISION LIMITING THE TIME WITHIN WHICH ANY ACTION FOR ASSESSMENT, REASSESSMENT OR RECOMPUTATION MAY BE TAKEN 68. IN N. KT. SIVALINGAM CHETTIAR (1967) 66 ITR 586 , THIS COURT HELD (PAGE 589) COUNSEL FOR THE COMMISSIONER CONTENDS THAT THE PRI NCIPLE OF MURLIDHAR BHAGWAN DAS CASE (1964) 52 ITR 335 DO ES NOT GOVERN THE PRESENT CASE, BECAUSE IN THAT CASE PROCEEDINGS FOR ASSESSMENT WERE COMMENCED IN CONSEQUENCE OF OR TO GIVE EFFECT TO AN EXPRESS DIRE CTION OF THE APPELLATE ASSISTANT COMMISSIONER AND IT WAS HEL D BY THIS COURT THAT A DIRECTION NOT NECESSARY FOR THE DISPOS AL OF THE 10 APPEAL IN RESPECT OF THE ASSESSMENT OF THE YEAR IN QUESTION BEFORE HIM WAS INOPERATIVE TO REMOVE THE BAR OF LIM ITATION. COUNSEL SAYS THAT, WHERE A MERE FINDING IS RECORDED BY THE APPELLATE OR REVISIONAL AUTHORITY DIFFERENT CONSIDE RATIONS ARISE AND THE BAR OF LIMITATION PRESCRIBED BY SECTI ON 34 WOULD BE REMOVED IF A PROCEEDING BE COMMENCED FOR ASSESSMENT IN CONSEQUENCE OF OR TO GIVE EFFECT TO T HE FINDING. THIS ARGUMENT HAS, IN OUR JUDGMENT, NO FORCE. IT IS CLEAR FROM THE OBSERVATION MADE BY THIS COURT THAT A FINDING WITHIN THE SECOND PROVISO TO SECTION 34(3) MUST BE NECESSARY FOR GIVING RELIEF IN RESPECT OF THE ASSES SMENT OF THE YEAR IN QUESTION. THE COURT IN THAT CASE EXPRESSLY LENT APPROVAL TO THE OBSERVATIONS OF TH ALLAHABAD HIGH C OURT IN PTD. HAZARI LAL V. ITO( (1960) 39 ITR 265 THAT THE WORD FINDING ONLY COVERS MATERIAL QUESTIONS WHICH ARI SE IN A PARTICULAR CASE FOR DECISION BY THE AUTHORITY HEARI NG THE CASE OR THE APPEAL WHICH, BEING NECESSARY FOR PASSI NG THE FINAL ORDER OR GIVING THE FINAL DECISION IN THE APP EAL, HAS BEEN THE SUBJECT MATTER OF CONTROVERSY BETWEEN THE INTERESTED PARTIES OR ON WHICH THE PARTIES CONCERNE D HAVE BEEN GIVEN A HEARING IN RAJINDER NATH V. CIT (1979) 120 ITR 14 (SC), THI S COURT HELD (PAGE 18) : THE EXPRESSIONS FINDING AND DIRECTION ARE LIMI TED IN MEANING. A FINDING GIVEN IN AN APPEAL, REVISION OR REFERENCE ARISING OUT OF AN ASSESSMENT MUST BE A FINDING NECE SSARY FOR THE DISPOSAL OF THE PARTICULAR CASE, THAT IS TO SAY , IN RESPECT OF THE PARTICULAR ASSESSEE AND IN RELATION TO THE P ARTICULAR ASSESSMENT YEAR. TO BE A NECESSARY FINDING, IT MUST BE DIRECTLY INVOLVED IN THE DISPOSAL OF THE CASE. IT I S POSSIBLE IN CERTAIN CASES THAT IN ORDER TO RENDER A FINDING IN RESPECT OF A, A FINDING IN RESPECT OF B MAY BE CALLED FOR. FO R INSTANCE, WHERE THE FACTS SHOW THAT THE INCOME CAN BELONG EIT HER TO A OR B AND TO NO ONE ELSE, A FINDING THAT IT BELONGS TO B OR DOES NOT BELONG TO B OULD BE DETERMINATIVE OF THE I SSUE WHETHER IT CAN BE TAXED AS AS INCOME. A FINDING R ESPECTING B IS INTIMATELY INVOLVED AS A STEP IN THE PROCESS O F REACHING THE ULTIMATE FINDING RESPECTING A. IF, HOWEVER, TH E FINDING AS TO AS LIABILOITY CAN BE DIRECTLY ARRIVED AT WITHOU T NECESSITATING A FINDING IN RESPECT OF B, THEN A FIN DING MADE 11 IN RESPECT OF B IS AN INCIDENTAL FINDING ONLY. IT IS NOT A FINDING NECESSARY FOR THE DISPOSAL OF THE CASE PERT AINING TO A. THE SAME PRINCIPLES SEEM TO APPLY WHEN THE QUES TION IS WHETHER THE INCOME UNDER ENQUIRY IS TAXABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION OR ANY OTHER ASSESSMENT YEAR. AS REGARDS THE EXPRESSION DIRECTI ON IN SECTION 153(3)(II) OF THE ACT, IT IS NOW WELL SETTL ED THAT IT MUST BE AN EXPRESS DIRECTION NECESSARY FOR THE DISP OSAL OF THE CASE BEFORE THE AUTHORITY OR COURT. IT MUST ALS O BE A DIRECTION WHICH THE AUTHORITY OR COURT IS EMPOWERED TO GIVE WHILE DECIDING THE CASE BEFORE IT. THE EXPRESSIONS FINDING AND DIRECTION IN SECTION 153(3)(II) OF THE ACT MU ST BE ACCORDINGLY CONFINED. SECTION 153(3)(II) IS NOT A P ROVISION ENLARGING THE JURISDICTION OF THE AUTHORITY OR COUR T. IT IS A PROVISION WHICH MERELY RAISES THE BAR OF LIMITATION OF MAKING AN ASSESSMENT ORDER UNDER SECTION 143 OR SEC TION 144 OR SECTION 147 : ITO V. MURLIDHAR BHAGWAN DAS ( 1964) 52 ITR 335 AND N. KT. SIVALINGAM CHETTIAR (1967) 66 ITR 586 (SC). THE QUESTION FORMULATED BY THE TRIBUNAL RAISES THE POINT WHETHER THE APPELLATE ASSISTANT COMMISS IONER COULD CONVERT THE PROVISIONS OF SECTION 147(1) INTO THOSE OF SECTION 153(3)(II) OF THE ACT. IN VIEW OF SECTION 1 53(3)(II) DEALING WITH LIMITATION MERELY, IT IS NOT EASY TO A PPRECIATE THE RELEVANCE OR VALIDITY OF THE POINT. 72. WHEN A STATUTE PROVIDES FOR DIFFERENT HIERARCHI ES PROVIDING FOR FORUMS IN RELATION TO PASSING OF AN O RDER AS ALSO APPELLATE OR ORIGINAL ORDER, BY NO STRETCH OF IMAGINATION CAN A HIGHER AUTHORITY INTERFERE WITH T HE INDEPENDENCE WHICH IS THE BASIC FEATURE OF ANY STAT UTORY SCHEME INVOLVING ADJUDICATORY PROCESS. 7. IF THE CONCLUSION DRAWN BY THE HONBLE APEX CO URT IN THE AFORESAID CASE OF GREEN WORLD CORPORATION (SUPRA) I S PERUSED, IT DOES NOT SUPPORT THE CASE OF THE ASSESS EE BECAUSE IN THAT CASE THE ORDER WAS PASSED BY THE AO AT THE DICTATES OF THE LEARNED COMMISSIONER WHEREAS IN THE PRESENT APPEAL, THE LEARNED AO HIMSELF HAS REQUESTED THE LEARNED COMMISSIONER THAT THE ORDER PASSED U/S 143(3) IS ER RONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, TH EREFORE, A PROPOSAL WAS MADE TO INVOKE JURISDICTION U/S 263 OF THE ACT, CONSEQUENTLY, IT IS ON DIFFERENT FACTS. EVEN OTHER WISE, THE SCOPE AND AMBIT OF PROCEEDINGS FOR RECTIFICATION OF AN ORDER 12 U/S 154 AND PROCEEDINGS FOR REVISION UNDER SECTION 263 ARE DISTINCT AND DIFFERENT. ORDER OF RECTIFICATION CAN BE PASSED ON CERTAIN CONTINGENCIES. IF AN ORDER OF ASSESSMEN T IS RECTIFIED BY THE AO IN TERMS OF SECTION 154, THE SA ME ITSELF MAY BE A SUBJECT MATTER OF PROCEEDINGS UNDER SECTI ON 263. THE POWER OF REVISION UNDER SECTION 263 IS EXERCISE D BY A HIGHER AUTHORITY. WHEN AN ORDER IS PASSED BY A HIG HER AUTHORITY, THE LOWER AUTHORITY IS BOUND TO FOLLOW T HE SAME, KEEPING IN VIEW THE PRINCIPLE OF JUDICIAL DISCIPLIN E. WHEN DIFFERENT JURISDICTIONS ARE CONFERRED UPON DIFFEREN T AUTHORITIES, TO BE EXERCISED ON DIFFERENT CONDITION S, BOTH MAY NOT BE HELD TO BE OVER-LAPPING WITH EACH OTHER. JUR ISDICTION U/S 154 IS ONLY TO BE EXERCISED WHEN THE ERROR IS A PPARENT ON THE FACE OF THE RECORD. IT DOES NOT CONFER ANY POW ER OF REVIEW. AN ORDER OF ASSESSMENT MAY OR MAY NOT BE RE CTIFIED. THEREFORE, THE CONTENTION OF THE LEARNED COUNSEL FO R THE ASSESSEE THAT THE AO HIMSELF WAS EMPOWERED TO RECTI FY HIS OWN ORDER ALSO DOES NOT HELP THE ASSESSEE BECAUSE I F AN ORDER OF RECTIFICATION IS PASSED BY AN ASSESSING AU THORITY, THE RECTIFIED ORDER SHALL BE GIVEN EFFECT TO. HOWEVER, ONLY BECAUSE AN ORDER OF ASSESSMENT HAS UNDERGONE RECTI FICATION AT THE HANDS OF THE AO, THE SAME WOULD NOT MEAN THA T REVISIONAL AUTHORITY SHALL BE DENUDED OF EXERCISING ITS REVISIONAL JURISDICTION. SUCH AN INTERPRETATION WO ULD RUN COUNTER TO THE SCHEME OF THE ACT AS NO HARD AND FAS T RULE CAN BE LAID DOWN. EVEN OTHERWISE, EACH CASE IS REQUIRED TO BE CONSIDERED ON ITS OWN FACTS. OUR VIEW FINDS FURTHE R SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF CIT V. RALSON INDUSTRIES LIMITED; (2007) 15 8 TAXMAN 160. IT CAN BE SAID THAT BEFORE THE LEARNED COMMISSIONER INVOKES HIS POWERS OF REVISION UNDER S ECTION 263, THE ONLY CONDITION IS THAT HE SHOULD GET HIMSE LF SATISFIED THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. BOTH THESE CONDITIONS SH OULD BE IN EXISTENCE TOGETHER. THE ULTIMATE AIM OF THE PROVISI ONS OF THE ACT IS THAT THE CORRECT TAX SHOULD BE PAID AND THER E SHOULD BE NO GRIEVANCE TO EITHER SIDE. THEREFORE, THE ASSE SSEE IS NOT PERMITTED TO PICK AND CHOOSE THE JURISDICTION OF A PARTICULAR AUTHORITY AND ALSO NOT SUPPOSED TO ADVISE THE DEPAR TMENT UNLESS AND UNTIL THE SAME IS CONTRARY TO THE PROVIS IONS OF THE ACT. THE HONBLE CALCUTTA HIGH COURT IN THE CASE O F CHRISTIAN MICA INDUSTRIES LIMITED (120 ITR 627) EVE N WENT TO THE EXTENT THAT THE POWER OF THE COMMISSIONER U/ S 263 IS 13 NOT CONFINED TO ONLY AN ORDER OF ASSESSMENT PASSED BY THE ITO BUT IT EXTENDS TO ALL ORDERS PASSED BY HIM. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEMENTS, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED COMMISSIONER IS QUITE JUSTIFIED IN INVOKING HIS JURISDICTION UNDER SECTIO N 263 OF THE ACT ON THE PROPOSAL OF THE AO. THEREFORE , THIS GROUND OF THE ASSESSEE IS HAVING NO MERIT, CONSEQUENTLY , DISMISSED. 8. ON MERIT, THE ASSESSEE HAS RAISED THE GROUND THA T THE LEARNED COMMISSIONER ERRED IN WITHDRAWING THE DEDUC TION CORRECTLY ALLOWED BY THE AO UNDER FIRST PROVISO TO SECTION 36(1)(VIIA) FOR A SUM OF RS.11,30,74,938/- AND CONS EQUENT DIRECTION TO THE AO TO RECOMPUTE THE TOTAL INCOME, TAX AND INTEREST. DURING HEARING OF THIS GROUND, THE CONTENTION RAIS ED ON BEHALF OF THE ASSESSEE IS THAT AS PER THE PROVISION S OF SECTION 36(1)(VIIA) OF THE ACT, THERE IS AN OPTION AVAILABL E WITH THE ASSESSEE FOR ANY YEAR OR CONSEQUENT FIVE YEARS TO C LAIM THE DEDUCTION BECAUSE OPTION HAS BEEN GIVEN TO THE BANK TO AVAIL THE DEDUCTION. THE LEARNED COUNSEL INVITED OUR ATT ENTION TO THE LANGUAGE USED IN THE IMPUGNED SECTION ALONG WIT H THE CIRCULAR NO. 8 OF 2002 DATED 27.8.2002 OF THE CBDT. OUR ATTENTION WAS ALSO INVITED TO CIRCULAR NO. 7 OF 200 3 DATED 5.9.2003 WHICH WAS CLAIMED TO BE CLARIFICATORY IN N ATURE. ON THE OTHER HAND, THE LEARNED CIT DR STRONGLY DEF ENDED THE IMPUGNED ORDER BY CONTENDING THAT IT WAS A ONE TIME MEASURE TO IMPROVE THE HEALTH OF THE ASSESSEE BANK SO THAT THE BANK MAY COMPETE INTERNATIONALLY. THEREFORE , IT IS AVAILABLE FOR ONLY ONE YEAR AND NOT FOR FIVE YEARS. RELIANCE WAS PLACED UPON THE DECISION IN PANDIAN CHEMICALS L IMITED V. CIT; 262 ITR 278 (SC) AND K.P. VARGHESE V. ITO; 131 ITR 597 (SC). 9. WE HAVE CONSIDERED THE SUBMISSIONS PUT FORTH BY THE RESPECTIVE LEARNED COUNSELS, PERUSED THE MATERIAL A VAILABLE ON FILE, BOARD CIRCULARS BROUGHT TO OUR NOTICE BY T HE RESPECTIVE PARTIES AND HAVE ALSO CONSIDERED THE JUD ICIAL PRONOUNCEMENTS. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT PROVISIONS OF TH E ACT AS CONTAINED U/S 36 OF THE ACT :- 14 96 [(VIIA) 97 [ 98 IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY (A) A SCHEDULED BANK [NOT BEING 99 [* * *] A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUT SIDE INDIA] OR A NON- SCHEDULED BANK 1 [OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BAN K], AN AMOUNT 2 [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCE EDING 3 [TEN] PER CENT OF THE AGGREGATE AVERAGE ADVANCES MA DE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRE SCRIBED MANNER : 4 [ PROVIDED THAT A SCHEDULED BANK OR A NON-SCHEDULED BANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS OPTION , BE ALLOWED IN ANY OF THE RELEVANT ASSESSMENT YEARS, DEDUCTION IN RESPECT OF ANY PROVISION MADE BY IT FOR ANY ASSETS CLASSIFIED BY THE RESERVE BANK OF INDIA AS DOUBTFUL ASSETS OR LOSS ASSETS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY IT IN THIS BEHALF, FOR AN AMOUNT NOT EXCEEDING FIVE PER CENT OF THE AMOUNT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF THE BANK ON THE LAST DAY OF THE PREVIOUS YEAR:] 5 [ PROVIDED FURTHER THAT FOR THE RELEVANT ASSESSMENT YEARS COM-MENCING ON OR AFTER THE 1ST DAY OF APRIL, 2003 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2005, THE PROVI SIONS OF THE FIRST PROVISO SHALL HAVE EFFECT AS IF FOR THE W ORDS FIVE PER CENT, THE WORDS TEN PER CENT HAD BEEN SUBSTI TUTED :] 6 [ PROVIDED ALSO THAT A SCHEDULED BANK OR A NON-SCHEDULED BANK REFERRED TO IN THIS SUB-CLAUSE SHALL, AT ITS O PTION, BE ALLOWED A FURTHER DEDUCTION IN EXCESS OF THE LIMITS SPECIFIED IN THE FOREGOING PROVISIONS, FOR AN AMOUNT NOT EXCE EDING THE INCOME DERIVED FROM REDEMPTION OF SECURITIES IN ACC ORDANCE WITH A SCHEME FRAMED BY THE CENTRAL GOVERNMENT: PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED UNDER THE THIRD PROVISO UNLESS SUCH INCOME HAS BEEN DISCLOSED IN THE RETURN OF INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. ] 7 [EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUSE, RELEVANT ASSESSMENT YEARS MEANS THE FIVE CONSECUT IVE ASSESSMENT YEARS COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 2000 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2005;] 15 IF THE LANGUAGE CONTAINED IN THE AFORESAID SECTION IS ANALYSED AND ESPECIALLY PROVISO INSERTED BY THE FIN ANCE ACT ,1999 WITH EFFECT FROM 1.4.2000 TO SUB-CLAUSE (VIIA ) IT CLEARLY SAYS THE SCHEDULED BANK OR A NON-SCHEDULED BANK REFERRED IN THIS SUB-CLAUSE SHALL, AT ITS OPTION , BE ALLOWED IN ANY OF THE RELEVANT ASSESSMENT YEARS, THE DEDUCTION IN RESPECT OF ANY PROVISION MADE BY IT FOR ANY ASSETS CLASSIFIED BY THE RESERVE BANK OF INDIA AS DOUBTFUL ASSET/LOSS ASSET IN ACCORDANCE WITH THE GUIDELINES ISSUED BY IT IN THIS BEHALF FOR AN AMOUNT NOT EXCEEDING 5% OF THE AMOUNT OF SUCH AS SET SHOWN IN THE BOOKS OF ACCOUNTS OF THE BANK BY T HE NEXT PROVISO FOR THE RELEVANT ASSESSMENT YEARS COMMENCIN G ON OR AFTER THE IST DAY OF 2003 AND BEFORE THE FIRST DAY OF APRIL, 2005 SPECIFIES ABOUT PER CENTAGE FROM 5% TO 10%. T HE EXPLANATION INSERTED BY FINANCE ACT, 1999 WITH EFFE CT FROM 1.4.2000 IS AS UNDER :- EXPLANATION FOR THE PURPOSES OF THIS SUB-CLAUSE RELEVANTASSESSMENT YEARS MEANS THE FIVE CONSECUTI VE ASSESSMENT YEAR COMMENCING ON OR AFTER THE IST DAY OF APRIL, 2000 AND ENDING BEFORE THE IST DAY OF APRIL, 2005. THE AFORESAID PROVISO ALONG WITH EXPLANATION IS VERY CLEAR AND IT TALKS ABOUT FIVE CONSECUTIVE ASSESSMENT YEAR S, THEREFORE, WE ARE OF THE VIEW THAT THE WORD ANY S IGNIFIES NOT ONLY SINGLE BUT MORE THAN ONE ALSO. THE SCOPE A ND EFFECT OF INSERTION (WITH EFFECT FROM 1.4.2000) OF A NEW P ROVISO TO SUB-CLAUSE (A) TO SECTION 36 (1)(VIIA) BY THE FINAN CE ACT, 1999 (27 OF 1999) HAVE BEEN ELABORATED BY THE DEPAR TMENTAL CIRCULAR NO. 779 DATED 14 TH SEPTEMBER, 1999 (PAGE 2054 CHATURVEDI & PITHISARIA VOLUME 7 (1) 5 TH EDN.) AS PER WHICH IN ORDER TO STRENGTHEN THE FINANCIAL POSITION OF TH E BANK, THE FINANCE ACT, 1999 PROVIDED AN OPTION TO SUCH BANK, FOR A PERIOD OF FIVE YEARS, TO CLAIM A DEDUCTION FOR ANY PROVISION MADE BY IT IN RESPECT OF DOUBTFUL OR LOSS ASSET IN ACCORDANCE WITH THE GUIDELINES ISSUED BY RESERVE BANK OF INDIA FOR AN AMOUNT NOT EXCEEDING 5% OF SUCH LOSS OR DOUBTFUL AS SET. THIS AMENDMENT TOOK EFFECT FROM IST APRIL, 2000 AN D ACCORDINGLY WILL APPLY IN RELATION TO ASSESSMENT YE AR 2000- 01 AND SUBSEQUENT YEARS UPTO THE ASSESSMENT YEARS 2 004-05 (SECTION 22). BY THE FINANCE ACT, 2000 (10 OF 200 0), IN CLAUSE (V) OF THE EXPLANATION TO SECTION 36 (1)(VII A), FOR THE 16 WORDS, BRACKETS AND FIGURES, APPROVED BY THE CENTR AL GOVERNMENT UNDER CLAUSE (VIII) OF THIS SUB-SECTION, THE WORDS, BRACKETS AND FIGURES ELIGIBLE FOR DEDUCTION UNDER CLAUSE (VIIIA) OF THIS SUB-SECTION HAVE BEEN SUBST ITUTED (W.E.F. 1.4.2000). THIS SUBSTITUTION IS CONSEQUENT IAL TO THE OMISSION (W.E.F. 1.4.2000) OF THE FIRST PROVISO TO SECTION 36 (1)(VIII) BY THE FINANCE ACT, 1999. AS A RESULT OF SUCH OMISSION, THE CONDITION AS TO APPROVAL BY THE CENTR AL GOVERNMENT UNDER SECTION 36(1)(VIII) HAS BEEN REMOV ED (W.E.F. 1.4.2000). BY THE FINANCE ACT, 2002 (20 OF 2002) SUB-CLAUSE (A) OF SECTION 36(1)(VIIA) HAS BEEN AMEN DED AND A NEW SECOND PROVISO TO SUB-CLAUSE (A) OF SECTION 3 6(1)(VIIA) HAS BEEN INSERTED AND A NEW PROVISO TO SUB-CLAUSE ( C) OF SECTION 36(1)(VIIA) HAS BEEN INSERTED ALL WITH EFFE CT FROM 1.4.2003. THUS, THE SCOPE AND EFFECT OF ALL THESE A MENDMENTS MADE IN SECTION 36(1)(VIIA) BY THE FINANCE ACT, 200 2 HAVE BEEN ELABORATED BY DEPARTMENTAL CIRCULAR NO. 8 OF 2 002 DATED 27 TH AUGUST, 2002 WHICH READS AS UNDER :- 32. FISCAL INCENTIVE FOR PROVISIONING IN RESPECT O F BAD AND DOUBTFUL DEBTS IN THE CASE OF BANKS AND FINANCI AL INSTITUTIONS.- 32.1 UNDER THE EXISTING PROVISIONS O F SUB- CLAUSE (A) OF CLAUSE (VIIA) OF SUB-SECTION (1) OF S ECTION 36, A SCHEDULED BANK (NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A FOREIGN COUNTRY) OR A NON-SCHEDULED B ANK IS ALLOWED A DEDUCTION IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF FIVE PER CENT OF TH E TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THE SAID CLAUSE AND CHAPTER VI-A) AND AN AMOUNT NOT EXC EEDING TEN PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANKS. 32.2 IN ORDER TO PROVIDE FISCAL INCENTIVE TO SCHEDU LED AND NON-SCHEDULED BANKS, THE FINANCE ACT, 2002, HAS AMENDED THE SAID SUB-CLAUSE TO INCREASE THE PRESENT LIMIT OF DEDUCTION OF FIVE PER CENT OF THE TOTAL INCOME TO S EVEN AND ONE HALF PER CENT OF THE TOTAL INCOME. 32.3 THE FIRST PROVISO TO SECTION 36(1)(VIIA)(A) GI VES AN OPTION TO A SCHEDULED BANK OR A NON-SCHEDULED BANK TO CLAIM DEDUCTION IN RESPECT OF ANY PROVISION MADE BY THE BANK, TO THE EXTENT OF FIVE PER CENT OF THE AMOUNT OF ANY ASSETS CLASSIFIED BY THE RESERVE BANK OF INDIA AS D OUBTFUL 17 ASSETS OR LOSS ASSETS SHOWN IN THE BOOKS OF ACCOUNT OF THE BANK ON THE LAST DAY OF THE PREVIOUS YEAR. THIS OPT ION IS AVAILABLE FOR FIVE CONSECUTIVE ASSESSMENT YEARS COM MENCING ON OR AFTER IST APRIL, 2000, AND ENDING BEFORE IST APRIL, 2005. 32.4 FURTHER, UNDER SUB-CLAUSE OF CLAUSE (VIIA) O F SUB-SECTION (1) OF SECTION 36, A DEDUCTION TO THE E XTENT OF FIVE PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKIN G ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) IS A LLOWED TO A PUBLIC FINANCIAL INSTITUTION, A STATE FINANCIAL C ORPORATION AND A STATE INDUSTRIAL INVESTMENT CORPORATION IN RE SPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY SU CH INSTITUTIONS OR CORPORATIONS. THE FINANCE ACT, 2002 INCREASED THE LIMIT OF 5%, GI VEN UNDER THE THEN PROVISO TO SUB-CLAUSE (A) TO 10% FOR A PERIOD OF TWO CONSECUTIVE ASSESSMENT YEARS COMMENCING ON O R AFTER IST APRIL, 2003 AND ENDING BEFORE IST APRIL, 2005. BY THE FINANCE ACT, 2003 (32 OF 2003), NEW THIRD AND FOURT H PROVISOS TO SUB-CLAUSE (A) OF SECTION 36(1)(VIIA) W AS INSERTED (WITH EFFECT FROM 1.4.2004). THESE INSERTIONS TOOK EFFECT FROM IST APRIL, 2004 AND ACCORDINGLY APPLY IN RELAT ION TO ASSESSMENT YEAR 2004-05 AND SUBSEQUENT YEARS. THE DEPARTMENTAL CIRCULAR NO. 7 OF 2003 DATED 5 TH SEPTEMBER, 2003 HAS CLARIFIED THE POSITION. IF THE AFORESAID CIRCULARS ARE ANALYSED BY KEEPING THEM IN JUXTAPOSITION WITH PROVISOS (AS DISCUSSED ABOVE), IT CAN BE SAID THAT THE FIRST PROVISO TO SECTION 36(1)(VIIA)(A) GIVES AN OPTION TO A SCHEDUL ED BANK OR A NON-SCHEDULED BANK TO CLAIM DEDUCTION IN RESPECT OF ANY PROVISIONS FOR AND SUCH OPTION IS AVAILABLE FOR FI VE CONSECUTIVE ASSESSMENT YEARS ON OR AFTER IST APRIL, 2000 AND ENDING BEFORE IST APRIL, 2005. SECTION 36(1)(VIIA) OF THE ACT WAS INTRODUCED BY THE INCOME TAX (AMENDMENT) ACT, 1 986 WITH A VIEW TO PROVIDE FOR GRANT OF DEDUCTION IN RE SPECT OF PROVISION FOR BAD DEBT MADE BY ALL THE BANKS UPTO 5% SUBJECT TO CHANGES OF PER CENTAGE FROM TIME TO TIM E, AS PRESCRIBED, OF THEIR TOTAL INCOME NOT EXCEEDING THE PRESCRIBED LIMIT OF THE AGGREGATE ADVANCES MADE BY RURAL BRANCHES OF SUCH BANK TO BE COMPUTED IN THE PRESCRI BED MANNER. IN THE LIGHT OF THE AFORESAID DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT OPTION TO AVAIL DEDUCTION/I NCENTIVE 18 IS AVAILABLE FOR FIVE CONSECUTIVE ASSESSMENT YEARS COMMENCING ON OR AFTER IST APRIL, 2000 AND ENDING BEFORE IST APRIL, 2005. THEREFORE, THIS GROUND OF THE ASSE SSEE IS ALLOWED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 28 TH JANUARY,2010. 3. IN THE AFORESAID ORDER, THE BENCH HAS ALREADY CO NSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS, FACTS OF THE CASE INCLUDIN G THE CLAIMS MADE FOR DIFFERENT ASSESSMENT YEARS (INCLUDING ASSESSMEN T YEAR 2003-04) AS IS EVIDENT FROM PAGE SIX (MENTIONED IN PARA 3 ON WARDS) AND ULTIMATELY DECIDED THAT OPTION IS AVAILABLE WITH TH E ASSESSEEE FOR DEDUCTION/INCENTIVE FOR 5 CONSECUTIVE ASSESSMENT YE ARS COMMENCING ON OR AFTER IST APRIL, 2000 AND ENDING BEFORE IST A PRIL, 2005. THE BENCH HAS ALREADY CONSIDERED THE DEPARTMENTAL CIRCU LARS IN THE LIGHT OF FIRST PROVISO TO SECTION 36(1)(VIIIA)(A) OF THE ACT WHICH GIVES AN OPTION TO A SCHEDULED BANK OR A NON-SCHEDULED BANK TO CLAIM SUCH DEDUCTION. IN VIEW OF THESE FACTS AND VARIOUS JUDIC IAL PRONOUNCEMENTS CONTAINED IN THE AFORESAID ORDER, WE HAVE NOT FOUND ANY INFIRMITY IN THE STAND OF THE LD. CIT(A), THEREFORE, THIS APPEAL OF THE REVENUE IS HAVING NO MERIT, CONSEQUENTLY DISMISSED. 4. NOW WE SHALL TAKE UP APPEAL IN ITA NO. 851/IND/2 005 19 (ASSESSMENT YEAR 2002-03). THOUGH VARIOUS GROUNDS H AVE BEEN RAISED BY THE REVENUE BUT SINCE APPROVAL FROM THE COD WAS OBTAINED ONLY FOR GROUND NOS. 2 AND 4 AS CONTAINED IN ORDER IN MA NO. 23 AND 24/IND/2009 ORDER DATED 24.11.2009, THEREFORE, WE A RE SUPPOSED TO ADJUDICATE ONLY GROUND NOS. 2 AND 4. AT THE OUTSET IT WAS SUBMITTED THAT GROUND NO. 4 I.E. ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING TH E ADDITION OF RS.9,58,65,019/- MADE ON ACCOUNT OF ADDITIONAL DEDU CTION CLAIMED UNDER SECTION 36(1)(VII)(A) OF THE ACT IS COVERED B Y THE AFORESAID ORDER OF THE TRIBUNAL DATED 28.1.2010. THE LEARNED CIT DR AGREED TO THE AFORESAID FACTUAL MATRIX. IN VIEW OF THE ABOVE, WE FIND THAT THE TRIBUNAL VID E ORDER IN ITA NO. 353/IND/2008 (SUPRA) HAS DELIBERATED UPON THE I SSUE AND EVEN WHILE DISPOSING OF THE AFORESAID APPEAL (ITA NO. 23 /IND/2007) HAS DISMISSED THE APPEAL OF THE REVENUE ON THE IDENTICA L FACTS/GROUNDS, CONSEQUENTLY THIS GROUND OF THE REVENUE IS ALSO DIS MISSED. 5. THE NEXT GROUND RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. FIRST APPELLATE AUTHORITY ERRED IN DELETING THE ADDITION OF RS.1,22,69,31,898 /- ON ACCOUNT OF 20 INTEREST FOR BROKEN PERIOD ON PURCHASE OF SECURITIE S. THE LEARNED CIT DR SUBMITTED THAT THE AO DISALLOWED THE IMPUGNED INTEREST TREATING THE PURCHASE OF SECURITIES BY THE ASSESSEE BANK AS AN ACTIVITY OF INVESTMENT WHEREAS THE LEARNED CIT(A) ALLOWED THE INTEREST TREATING THE ASSESSEE AS A DEALER IN SHARE S AND HOLDING SUCH SECURITIES AS STOCK IN TRADE. HOWEVER, AS PER CBDT CIRCULAR NO. 665 ISSUED IN 1993 THE BOARD HAD GIVEN CLEAR-CUT DIRECT IONS AS REGARDS THE EXAMINATION OF FACTS IN EACH CASE AS PER THE GUIDEL INES ISSUED BY RBI REGARDING THE NATURE OF SUCH SECURITIES AND IN THE PRESENT CASE THE LEARNED CIT(A) HAD NOT DONE SO. THE LEARNED CIT DR ALSO REFERRED TO THE NEW CIRCULAR ISSUED BY CBDT IN THE YEAR 2008 AN D SUBSEQUENT ASSESSMENT ORDERS PASSED BY THE AO IN THE CASE OF T HE ASSESSEE WHEREIN SUCH INTEREST HAD BEEN DISALLOWED AS THE AS SESSEE WAS FOUND TO HAVE PURCHASED SECURITIES AS INVESTMENT. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE O THER HAND, STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THER E IS NO CHANGE IN THE SITUATION FROM EARLIER YEARS AND DURING THE LAS T EIGHT YEARS THE DEPARTMENT HAD BEEN ADMITTING THE CLAIM OF THE ASSE SSEE. MR. MUNSHI CLAIMED THAT IT IS STOCK IN TRADE. RELIANCE WAS PLA CED ON THE DECISIONS 21 IN UNITED COMMERCIAL BANK V.CIT; 240 ITR 355 (SC), CIT V. BANK OF BARODA; 262 ITR 334 (BOM); CIT V. KARUR VYSYA BA NK LIMITED; 273 ITR 510 (MAD) AND LAKSHMI VILAS BANK LTD. V. CI T; 284 ITR 93 (MAD.). THE LD. COUNSEL FOR THE ASSESSEE FURTHER SU BMITTED THAT THE CIT(A) HAD GIVEN A CATEGORICAL FINDING THAT SINCE F IRST ASSESSMENT YEAR THE ASSESSEE WAS HOLDING SECURITIES AS STOCK I N TRADE AND IN EARLIER YEARS THE DEPARTMENT HAD NOT FILED ANY APPEAL AGAIN ST THE ORDER OF THE LEARNED CIT(A), HENCE THERE WAS NO MERIT IN THE REL EVANT CONTENTIONS OF THE LEARNED CIT DR. THE LEARNED CIT DR, IN THE REJOINDER, CONTENDED TH AT IT WAS INCUMBENT UPON THE LEARNED CIT(A) TO EXAMINE THE FA CTS AS REGARDS THE NATURE OF SECURITIES PURCHASED BY THE ASSESSEE IN THE YEAR, UNDER CONSIDERATION, AS IN EACH YEAR THERE WERE DIFFERENT GUIDELINES AND THE ASSESSEE SHOULD HAVE SUBMITTED THE GUIDELINES BEFOR E THE CIT(A) TO MEET THE REQUIREMENTS OF CIRCULAR NO. 665 WHICH WAS NOT DONE AND, THEREFORE, IN ALL FAIRNESS THE MATTER SHOULD GO BAC K TO THE FILE OF THE LEARNED CIT(A) TO EXAMINE THE FACTS IN DETAIL AND T O ADJUDICATE THE ISSUE AFRESH AS PER LAW AFTER CONSIDERING THE RELEV ANT PROVISIONS OF LAW AND INSTRUCTIONS/GUIDELINES ISSUED BY RBI IN T HIS REGARD AND ALSO 22 THE ACCOUNTING POLICIES OF THE ASSESSEE BANK. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. RE PRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE LD. CIT((A) HAS CONSIDERED THE DECISION IN THE CASE OF CIT V. VIJAYA BANK LTD. VS. CIT; 187 ITR 541(SC), HONBLE BOMBAY HIGH COURT IN THE CASE OF AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION V. CIT; 258 ITR 601 WHEREIN IT HAS BEEN CLEARLY HELD THAT THE INTEREST FOR BROKEN PERIOD ON PURCHASE OF SECUR ITIES IS ALLOWABLE DEDUCTION. IDENTICAL RATIO WAS LAID DOWN BY THE HO NBLE KERALA HIGH COURT IN THE CASE OF CIT V. SOUTH INDIAN BANK LIMIT ED; 241 ITR 374. THERE IS A FURTHER FINDING IN THE IMPUGNED ORDER TH AT FOR THE ASSESSMENT YEARS 1996-97 TO 2001-02 THE SIMILAR ISS UE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THOUGH THERE IS FORCE IN TH E CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE BUT STILL CLEAR IN DEPENDENT FINDING IS REQUIRED ABOUT THE NATURE OF SECURITIES AND THEIR T REATMENT AS EACH YEAR IS INDEPENDENT, THEREFORE, THIS ISSUE IS SENT TO TH E FILE OF THE LEARNED CIT(A) FOR FRESH ADJUDICATION/EXAMINATION OF THE CL AIM OF THE ASSESSEE AS WELL AS THE STAND OF THE REVENUE AS PER LAW AND AFTER TAKING INTO CONSIDERATION THE RELEVANT GUIDELINES ISSUED B Y RBI. THE ASSESSEE 23 BE GIVEN OPPORTUNITY TO SUBSTANTIATE ITS CLAIM. THI S GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES ONLY. FINALLY, THE APPEALS OF THE REVENUE IN ITA NO. 23/ IND/2007 IS DISMISSED AND IN ITA NO. 851/IND/2005 IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 9.3.2010. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9.3.2010 COPY TO APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE